Telangana High Court

S.Ravinder, vs The Commissioner Of Income Taxiv, on 25 June, 2021

Bench: M.S.Ramachandra Rao, T.Vinod Kumar

     THE HIGH COURT OF JUDICDATURE FOR THE STATE OF
                 TELANGANA : HYDERABAD

                                   ****

WRIT PETITION NO.5974 OF 2005

S.Ravinder.

.. Petitioner Vs.

The Commissioner of Income Tax IV, Hyderabad and others .. Respondents

DATE OF THE JUDGMENT PRONOUNCED:25.06.2021

SUBMITTED FOR APPROVAL:

HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO AND HONOURABLE SRI JUSTICE T.VINOD KUMAR

1. Whether Reporters of Local newspapers Yes/No may be allowed to see the judgment?


2.            Whether the copies of judgment may be             Yes/No
                marked to Law Reporters/Journals


3.               Whether Their Lordships wish to                Yes/No
                see the fair copy of the judgment?




                                           ______________________
                                           M.S.RAMACHANDRA RAO, J



                                                     ________________
                                                      T.VINOD KUMAR, J

* HONOURABLE SRI JUSTICE M.S.RAMACHANDRA RAO AND HONOURABLE SRI JUSTSICE T.VINOD KUMAR

+ WRIT PETITION NO.5974 of 2005

% DATED JUNE, 2021

# S.Ravinder.

.. Petitioner Vs.


$ The Commissioner of Income Tax IV,
Hyderabad and others                                         .. Respondents



<Gist:



>Head Note:


! Counsel for the Petitioner           : Sri A.V.Siva Karthikeya


^Counsel for Respondents              : Sri J.V.Prasad,
                                                  Sr. Standing Counsel




? CASES REFERRED:

1   (1973) 31 STC 434 SC.
2   (1963) 14 STC 724 Mad.
3   (1978) 113 ITR 363 Mad.
4   (1994) 207 ITR 662 Ker.
5   (2004) 267 ITR 272 SC = (2004) 3 SCC 488

THE HON'BLE SRI JUSTICE M.S.RAMACHANDRA RAO AND THE HON'BLE SRI JUSTICE T.VINOD KUMAR

WRIT PETITION No.5974 of 2005

O R D E R:(per Hon'ble Sri Justice T.Vinod Kumar)

In this writ petition, the petitioner assails the correctness of the

proceeding, dt.30.09.2004, passed by the 1st respondent, under Section

264(6) of the Income-tax Act, 1961 (for short, 'the Act'), for the

Assessment Year 1997-98.

2. Heard Sri A.V.Siva Karthikeya, learned Counsel for the petitioner,

and Sri J.V.Prasad, learned Senior Standing Counsel, appearing on behalf

of the respondents.

3. The petitioner contends that the 3rd respondent passed an Order of

Assessment dt.31.03.2003, for the Assessment Year 1997-98 under

Section 144 read with Section 147 of the Act, on the father of the

petitioner, represented by the petitioner as the son and legal heir; that

aggrieved by the said Assessment Order, the petitioner had filed an

appeal before the 2nd respondent, as provided under the Act; the said

appeal filed by the petitioner was dismissed by the 2nd respondent, by

order dt.09.07.2003, holding that the appeal filed was void ab initio and

cannot be admitted, since the appellant had failed to pay the admitted tax

due, as per the return of income filed voluntarily on 31.03.2003; and the

2nd respondent, thus, held that no adjudication on merits of the appeal, is

warranted, having regard to the express provisions of Section 249(4)(a) of

the Act.

4. Petitioner further contends that, upon the rejection of the appeal

by the 2nd respondent (as cannot be admitted), the petitioner invoked the

power of Revision conferred on the 1st respondent under Section 264 of

the Act, and filed an application on 29.03.2004, seeking Revision of the

assessment order dt. 31.03.2003 made by the 3rd respondent. In the said

Revision preferred, the petitioner sought for reconsideration of the issue

relating to proceeds from sale of agricultural land by the petitioner's father

being subjected to Long Term Capital Gains, applying the provisions of

Section 54-F of the Act.

5. The 1st respondent by order dt.30.09.2004, rejected the said

Revision application filed by the petitioner. In the order, the

1st respondent stated the reason for such rejection as, since, the

petitioner/assessee filed an appeal against the Assessment Order of the

3rd respondent, dt.31.03.2003 before the 2nd respondent under Section

246 of the Act, and the 2nd respondent having dismissed the same by

order dt.09.07.2003, the provisions of Section 264(4) of the Act would

stand attracted. According to the 1st respondent, as per the mandate of

provisions of Section 264(4) of the Act, the 1st respondent shall not

exercise the power of revision in respect of an order that has been made

"subject of an appeal" to the Commissioner of Appeals or the Appellate

Tribunal. Thus, the 1st respondent rejected the Revision petition without

admitting the same.

6. The petitioner contends that the rejection of the Revision petition

by the 1st respondent, is without proper appreciation and understanding

of the scope and application of provisions of Section 264(4) of the Act;

that since the appeal filed by the petitioner to the 2nd respondent having

not been adjudicated, on merits and having been rejected as void ab initio

due to non-payment of admitted tax due, the same cannot be

considered as an "appeal adjudicated" under Section 251 of the Act; and

also that the rejection of the revision petition by the 1st respondent is also

contrary to Circular No.367, dt.26.05.1983, issued by the Central Board of

Direct Taxes, wherein it has been clarified that "where the appeal was

dismissed on the ground that the appeal was incompetent", the same

cannot be said to have made "subject of an appeal" under Section 251(1)

or Section 254(1) of the Act, thereby, attracting provisions of Section

264(4)(c) of the Act preventing/precluding the exercise of powers by the

1st respondent under Section 264 of the Act.

7. On the other hand, learned Senior Standing Counsel placing

reliance on the counter-affidavit supports the impugned order passed by

the 1st respondent under Section 264(6) of the Act and seeks for

sustaining the same.

8. We have given due consideration to the submissions made by the

learned counsel appearing for the parties.

9. The short question that falls for our consideration in this writ

petition is "Whether the rejection of the appeal by the 2nd respondent as

void ab initio for having been filed without complying with mandatory

provisions of Section 249(4)(a) of the Act, can be considered as a matter

having been "subject of an appeal", to oust or prevent the 1st respondent

from exercising the power of Revision conferred on him under Section 264

of the Act?"

10. Admittedly, in the facts of the present case, the appeal filed by the

petitioner against the order of the 3rd respondent dt.31.03.2003, had been

filed without payment of admitted tax due as per the return of income.

Since, the admitted tax due is required to be paid for filing the appeal

before the 2nd respondent for it to be entertained, and the appeal having

been filed by the petitioner without making such payment, the said

appeal, even if filed, cannot be considered as a validly presented appeal.

It is for the said reason, the 2nd respondent, without adjudicating the

matter on merits, has rejected the appeal as void ab initio, though by

using the term as "dismissed".

11. Any appeal, which is not accompanied either by the requisite Court

fee, or any other mandatory payment required to be made as per the

provisions of the relevant Statute, cannot be considered as a validly

presented appeal, and such appeal would be non-est in the eye of law.

Once an appeal is considered as non-est in the eye of law, any order

impugned in such appeal cannot be considered as "subject of an appeal",

as there is no ascertainment or adjudication of the issues raised in the

appeal on its merits.

12. The expression "subject of an appeal" as used in Section 264 of

Act, is analogous to the language used in Section 34 of Madras General

Sales Tax Act, 1959 (for short, 'the Sales Tax Act'), dealing the power of

review conferred on Board of Revenue. The Hon'ble Supreme Court in

BOARD OF REVENUE V/s. RAJ BROTHERS AGENCIES1, while

construing the meaning of the expression "the order has been made

subject of an appeal" as used in the Sales Tax Act, in deciding the

question, whether an appeal against an order, which was dismissed, as

having been barred by time, can be considered as an order, which had

been subject of an appeal, held that -

"This question does present some difficulty. But in view of the circumstances, which we shall presently set out, we will not be justified in examining the correctness of the conclusion reached by the High Court. As far back as 1963 the scope of Section 34 came up for consideration before the Madras High Court in ERODE YARN STORES V/s. STATE OF MADRAS2. Therein, the assessee contended that once an appeal is filed before a Tribunal, the Board is precluded from invoking its power under Section 34. The State of Madras controverted that position.

1 (1973) 31 STC 434 SC.

2 (1963) 14 STC 724 Mad.

Therein the State contended that before the jurisdiction of the Board to exercise its power under Section 34 can be held to be taken away, the appeal filed before the Tribunal must have been an effective appeal and that an appeal which was dismissed on the ground of limitation is not an effective appeal. The High Court of Madras accepted that contention and decided the case in favour of the State. In arriving at the conclusion that the words "subject of an appeal" mean subject of an "effective appeal", the High Court took into consideration the mischief that would otherwise arise, namely, all that an assessee, who wants to stifle the Board's suo motto power of revision, has to do is to file a time-barred appeal and get it dismissed. It was because of that difficulty the High Court in Erode Yarn Stores' case came to the conclusion that the expression "the order which has been the subject of an appeal" as meaning "subject of an effective appeal"."

13. In CHIRANJILAL DAGA V/s. COMMISSIONER OF INCOME

TAX3, the Madras High Court, while construing Section 33A of the Indian

Income Tax Act, 1922, which corresponds to Section 264 of the Act,

expressed the view that an order is made the "subject of an appeal"

within the meaning of Clause (c) of the first proviso to Sub-section (2) of

Section 33A, only when it is the subject-matter of an "effective" appeal.

The Madras High Court also held that if an appeal to the Appellate

Tribunal under Section 33 is not admitted and is disposed of on the

ground that it was filed after the prescribed time, the order cannot be said

to be the "subject of an appeal".

14. The Kerala High Court in C.C. JAYARAM V/s. CIT4 also expressed

a similar view and held that-

"There is no effective disposal of the petitioner's appeal either by the Commissioner of Income Tax (Appeals) or by the Income Tax Appellate Tribunal. In exhibit P-2, the Commissioner of Income Tax (Appeals) refused to entertain the appeal filed by the petitioner on the ground that the petitioner failed to pay the admitted tax and the said decision was confirmed by exhibit P-3 order of the Appellate Tribunal, so much so that there is no effective disposal of the petitioner's appeal and, consequently, the first respondent has jurisdiction to revise the order which has been made the subject of appeal before the Appellate Tribunal."

3 (1978) 113 ITR 363 Mad.

4 (1994) 207 ITR 662 Ker.

15. It is also to be noted that Section 251(1)(a) of the Act stipulates

that an appeal filed before the appellate authority to be considered as

disposed, would require such order under challenge to be either

confirmed, reduced, enhanced or annulled. It goes without saying that

the disposal is by considering the merits of the matter. In the facts of the

present case, the order passed by the 2nd respondent, in rejecting the

appeal as void ab initio, cannot be considered as disposing the appeal by

any of the above modes specified. Thus, it cannot be said that the order

of assessment of the 3rd respondent is "subject of an appeal" placing

embargo/ousting the jurisdiction of the 1st respondent under Section

264(4) of the Act.

16. Further, the Circular No.367, issued by the Central Board of Direct

Taxes, also supports the contention of the petitioner. It is trite law that

the Circulars issued by the CBDT are binding on the Revenue, in view of

the authoritative pronouncement of the Apex Court in COMMISSIONER

OF CUSTOMS V/s. INDIAN OIL CORPORATION LIMITED5. The

Supreme Court after examining the entire case law, culled out the

following principles:

(i) Although a circular is not binding on a court or an assessee, it is not open to the Revenue to raise a contention that it is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the Statute.